Commodity Decomposition Method

Units:	-
Mode:	Input Only
Multi-band:	False
Default Value:	1
Validation Rule:	In (0,1,2)
Key Property:	No
Description:	Method used to pass the optimal inventory trajectory from one simulation phase to the next

Commodity Decomposition Method controls the way the simulator decomposes the optimal LT Plan or MT Schedule inventory profile (the sequence of Closing Inventory values in time) down to ST Schedule. Decomposition is generally required only for inventories that are large enough that they do not attain their limits within a single step of ST Schedule. This switch takes the following values:

None (value = 0): No profile or shadow prices information is passed to ST Schedule, thus ST Schedule is free to run the inventory without reference to the mid-term solution.
Targets (value = 1): The sequence of Closing Inventory values out of LT Plan or MT Schedule is used to set target inventory values for each ST Schedule step. Thus ST Schedule will follow the same profile as the preceding simulation phase. To maintain feasibility, a penalty function is automatically created that allows the target to be violated at a pseudo-cost. The form of this penalty function are described below.
Shadow Prices (value = 2): The Shadow Price from LT Plan or MT Schedule is used to set the value of step Closing Inventory in ST Schedule. Thus ST Schedule will account for this future value of inventory when optimizing the production and consumption decisions.

Notes:

For any method other than "None" and when using partial chronology, it is preferred, but not required, that the LT Plan LDC Type or MT Schedule LDC Type is at least the resolution of the Horizon Chrono Step Type e.g. if ST Schedule is running with day-sized steps (look-ahead included) then the preceding phase should use a day resolution. If the preceding phase runs a coarser resolution such as week then the targets created could violate inventory limits. To compensate for this resolution mismatch penalties are introduced on the storage bounds according to the Decomposition Bound Penalty property. This does not apply to chronological LT Plan or MT Schedule.
Decomposition Method = "Targets" creates a penalty function around the decomposed profile so that variations are allowed in ST Schedule without creating infeasibilities in the target constraints. The penalty function is a piece-wise linear function that penalizes under-reaching of the target but not over-reaching. The function has 10 bands and the price in each band is based on a multiple of the Shadow Price calculated in MT Schedule thus:

Penalty (i) = (Shadow Price + c) × x ^ i

where:

i is the band number

The size of the bands is controlled by the following power function:

(Target - Min Inventory)) / 100.0) × a × e ^ (b × i)

where: